NFC Nixed: Why Apple's Bluetooth iBeacon Could Be a Big Deal

For years, the tech industry expected Apple to announce a new phone with an NFC chip that would dominate the world of wireless payment. It never happened--the reveal events for the iPhone 4, iPhone 4S, and iPhone 5 all came and went with no sign of near-field communication. In fact, when Apple showed off the wireless sharing system AirDrop with iOS7, it even took a jab at the way NFC-enabled Samsung phones have to be tapped together to share data. Now GigaOm has run a story that explains why Apple never gotten on board with NFC--the company has gone with something better.

"At WWDC in June, Apple quietly announced iBeacon, one of the more prominent features of iOS 7," writes Hari Gottipati on GigaOm. "Craig Federighi, Apple’s senior vice president of Software Engineering, mentioned nothing about about it in the keynote, and Apple hasn’t provided any details about it; it was only seen on one slide in the WWDC keynote." Apple has been very quiet about iBeacon, but Gottipati insists this is a big deal. Why? Because "it opens a door to new set of applications such as indoor maps and in-store marketing, it makes the internet of things a reality and it might kill NFC (near-field communications), the wireless technology most linked with mobile payments."

Instead of investing in NFC, Apple has skipped ahead to Bluetooth Low Energy, which has a range of up to 50 meters. That's a dramatic increase over NFC's few centimeters, and it's just one of the things that makes BLE more versatile. Apple's iBeacons include an ARM processor, flash memory, an accelerometer, and two years of battery life.

GigaOm suggests that instead of placing NFC tags on thousands of items, stores could set up a system of BLE antennas, which would support wireless payments from anywhere. Those antennas would also tap into BLE's geofencing and microlocation capabilities to support indoor mapping. GPS can't reach inside a building, but when your phone communicates with a nearby antenna, it can determine exactly where it is and what direction it's moving.

BLE is still a low energy standard, so you won't be streaming music over it, but you wouldn't do that with NFC, either. When it comes to price, however, there's a big difference between the two technologies.

"Estimote, a company which just launched to sell beacons, is taking pre-orders at the price of $99 for 3 beacons. The range of Estimote’s beacons is 50 meters, but the recommended range is 10 meters. If you go with the recommendation, you need 1 Estimote beacon for every 100 square meters, which would cost you about $5,000. If Macy’s wanted to add NFC tags (each at 10 cents) to all its products to send information to phones, it would cost $1,000 for 10,000 products, $10,000 for 100,000 products and $100,000 for 1 million products. NFC may not be needed on all products, but this will give a rough idea on how much it could cost."

This math makes BLE, and Apple's iBeacons, look like a no-brainer. But it ignores the fact that most NFC payments are made with only two devices: a smartphone and a payment terminal. Placing an NFC tag on every item in a store is a very, very different model. But Bluetooth is the far more common smartphone feature, and iBeacons offer a number of advantages beyond payments. Indoor mapping and automatic delivery of coupons and in-store promotions based on location could be big for stores. The Internet of Things concept could benefit from the low-power capabilities of iBeacons.

In the end, it will likely be the potential for advertising and push notifications that drives iBeacon adoption, not wireless payments. But if payments end up being along for the ride, Apple may have made finally made its way into the smartphone wallet space, after all.